Will Oil End War Economy?

In what seems to be a thinly veiled threat for the US dollar's hegemony and thus for US world domination, Russian president Vladimir Putin has said that Russia might switch its trade in oil from dollars to euros. He made the statement on 10 October during a joint news conference with German Chancellor Gerhard Schroeder in the town of Yekaterinburg in the Urals, where the two heads of state had a meeting.

This report, which I found in the Moscow Times, gives a clue to why Putin's announcement is of great import:

Dollar-based global oil trade now gives the United States carte blanche to print dollars without sparking inflation -- to fund huge expenses on wars, military build-ups, and consumer spending, as well as cut taxes and run up huge trade deficits.

Almost two-thirds of the world's currency reserves are kept in dollars, since oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. This effectively provides the U.S. economy with an interest-free loan, as these dollars can be invested back into the U.S. economy with zero currency risk.

Obviously, more hinges on our monetary system than just our economic well-being. Today's power structures are entirely dependent on this monetary system that funnels resources, "vacuumed up" all around the world, into the coffers of a few who would use them to control our destiny.

While a shift away from the Dollar as a reserve currency towards a dual standard or even towards a dominance of the Euro, will not eliminate this basic flaw of our monetary system, it might well put a different group of scoundrels in charge of world affairs for a while. Perhaps in a moment's distraction, we might then be able to get our heads far enough above the water to bring about a real change in the economy.

Earlier this year I read an excellent review by William Clark, who examined the question of a possible move of OPEC countries to trading oil in Euro rather than in US dollars and its implications for US economic and military world dominance.

Moscow Times - Friday, Oct. 10, 2003

Putin: Why Not Price Oil in Euros?
By Catherine Belton
Staff Writer

President Vladimir Putin said Thursday Russia could switch its trade in oil from dollars to euros, a move that could have far-reaching repercussions for the global balance of power -- potentially hurting the U.S. dollar and economy and providing a massive boost to the euro zone.

"We do not rule out that it is possible. That would be interesting for our European partners," Putin said at a joint news conference with German Chancellor Gerhard Schroeder in the Urals town of Yekaterinburg, where the two leaders conducted two-day talks.

"But this does not depend solely on us. We do not want to hurt prices on the market," he said.

"Putin's putting a big card on the table," said Youssef Ibrahim, managing director of the Strategic Energy Investment Group in Dubai and a member of the U.S. Council on Foreign Relations, an influential body of leading world thinkers thought to help set the United States' foreign policy agenda.

"In the context of what is happening worldwide, this statement is very important," he said.

Putin's words come in the wake of a protracted drive by the EU to attract more countries' trade and currency reserves into euros, in a bid to chip away at U.S. hegemony over the global economy and money supply.

A move by Russia, as the world's second largest oil exporter, to trade oil in euros, could provoke a chain reaction among other oil producers currently mulling a switch and would further boost the euro's gradually growing share of global currency reserves.

That would be a huge boon to the euro zone economy and potentially catastrophic for the United States. Dollar-based global oil trade now gives the United States carte blanche to print dollars without sparking inflation -- to fund huge expenses on wars, military build-ups, and consumer spending, as well as cut taxes and run up huge trade deficits.

Almost two-thirds of the world's currency reserves are kept in dollars, since oil importers pay in dollars and oil exporters keep their reserves in the currency they are paid in. This effectively provides the U.S. economy with an interest-free loan, as these dollars can be invested back into the U.S. economy with zero currency risk.

If a Russian move to the euro were to prompt other oil producers to do the same, it could be a "catastrophe" for the United States, Ibrahim said. "There are already a number of countries within OPEC that would prefer to trade in euros."

Iran, the world's No. 5 oil exporter, has also openly mulled a move into euros. And after the war in Iraq, there is growing debate in the United States' traditional ally Saudi Arabia on a switch too, though its government has not come down firmly on one side, Ibrahim said. "There is a revision going on of its strategic relationship with the United States. Already, they're buying more [French-made] Airbuses," he said. "The Saudi Crown Prince [Abdullah Bin Abdul Aziz Al-Saud]'s visit to Russia was of great significance and the regime is talking about closer cooperation with LUKoil and other Russian companies."

Under Saddam Hussein, Iraqi oil was traded in euros. "This was another reason [why the U.S. attacked]," Ibrahim said. "There is a great political dimension to this. Slowly more power and muscle is moving from the United States to the EU, and that's mainly because of what happened in Iraq," he said.

Putin had previously brought up the proposal to switch to euros as prime minister in October 1999, at a meeting of EU leaders in Helsinki. Then, in an attempt to forge a new bloc to counterbalance the United States, he made the proposal alongside calling for closer cooperation between Russia and the EU, including on security issues.

Since then, however, Russia's ties with the United States have warmed considerably -- and it is unclear whether Putin would risk damaging that relationship by going ahead with the euro move, analysts said.

"Putin is very much interested in changing the structure of OPEC and he cannot do that without the United States," said Alexander Rahr, an expert on Russia at the German Council on Foreign Relations. "He can only get a foothold for Russia in the Middle East with [U.S. help]. And, he wants to get contracts for the Russian oil industry in Iraq -- for this, too, he needs the United States."

Some analysts said that the statement appeared to be aimed at boosting Russia's global clout on the world stage. "Putin is trying to create a position for Russia as an independent player. But his aim is not to undermine relations [with the United States]. He just wants to boost Russia's position up from being a junior partner," said Dmitry Trenin, geopolitical analyst at the Carnegie Moscow Center.

Yevgeny Gavrilenkov, chief economist at Troika Dialog and an earlier architect of the Putin government's first economic plan, said debate is growing on a move to the euro as Russia mulls siding with the EU. "Such an idea is really possible," he said. "Why not? More than half of Russia's oil trade is with Europe. But there will be great opposition to this from the United States."

He said that while a switch would have no direct impact on the Russian economy, it would give a great boost to the euro zone.

LUKoil vice president Leonid Fedun said Thursday that he saw no problem in the euro switch and that payments for such transactions would be minimal, at just 0.08 percent.

"There is no problem ... If the state decides to do this, then we will support this initiative. From the point of view of the economy, there's no difference," Interfax quoted him as saying.

But even Fedun could not help putting a political price tag on the move. "We are ready to move to the euro if the country will be included in a visa-free regime with Europe," he said.

Rahr agreed that the timing of the statement seemed calculated to extract political concessions from the EU. "It's a bargaining chip," he said.

Gavrilenkov suggested Putin was also angling for EU concessions on other issues discussed in Yekaterinburg, such as terms for Russia's WTO accession.

27 Oct 2004 by Global Research
The Real Reasons Why Iran is the Next Target: The Emerging Euro-denominated International Oil MarketThe Iranians are about to commit an "offense" far greater than Saddam Hussein's conversion to the euro of Iraq's oil exports in the fall of 2000. Numerous articles have revealed Pentagon planning for operations against Iran as early as 2005. While the publicly stated reasons will be over Iran's nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare - Iran's upcoming euro-based oil Bourse.

Repatriation of the US Dollar
Thursday, May 19, 2005 - 09:36 AM
BY ROD COFFMAN - There is only one country in the world that has to take the US Dollar and that is the country of its birth, the United States. For the time being, most industrialized countries are forced to accumulate dollars in order to purchase oil...

The proposed Iranian oil BourseThe Iranian government has finally developed the ultimate "nuclear" weapon that can swiftly destroy the financial system underpinning the American Empire. That weapon is the Iranian Oil Bourse slated to open in March 2006.

The Real Reasons Why Iran is the Next Target:
The Emerging Euro-denominated International Oil MarkerThe Iranians are about to commit an "offense" far greater than Saddam Hussein's conversion to the euro of Iraq's oil exports in the fall of 2000. Numerous articles have revealed Pentagon planning for operations against Iran as early as 2005. While the publicly stated reasons will be over Iran's nuclear ambitions, there are unspoken macroeconomic drivers explaining the Real Reasons regarding the 2nd stage of petrodollar warfare - Iran's upcoming euro-based oil Bourse.

How the World Can Stop Bush
The Bush Regime has taken the US outside the boundaries of international law and is acting unilaterally, falsely declaring American military aggression to be "defensive" and in the interests of peace. Much of the world realizes the hypocrisy and danger in the Bush Regime's justification of the unbridled use of US military power, but no countries except other nuclear powers can challenge American aggression, and then only at the risk of all life on earth. The solution is nonmilitary challenge. If the rest of the world would simply stop purchasing US Treasuries, and instead dump their surplus dollars into the foreign exchange market, the Bush Regime would be overwhelmed with economic crisis and unable to wage war.

Oil Price Rise Causes Global Shift in Wealth
High oil prices are fueling one of the biggest transfers of wealth in history. Oil consumers are paying $4 billion to $5 billion more for crude oil every day than they did just five years ago, pumping more than $2 trillion into the coffers of oil companies and oil-producing nations this year alone.

In the United States, the rising bill for imported petroleum lowers already anemic consumer savings rates, adds to inflation, worsens the trade deficit, undermines the dollar and makes it more difficult for the Federal Reserve to balance its competing goals of fighting inflation and sustaining growth.

The Collapse Of American Power
Paul Craig Roberts, former Assistant Secretary of the US Treasury under Reagan, describes the sorry state of the US economy. The dollar is losing value against other currencies and its status as the world's reserve currency is in steep decline.

"When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners."

The International Monetary Fund issued a report Thursday on a possible replacement for the dollar as the world's reserve currency.

The IMF said Special Drawing Rights, or SDRs, could help stabilize the global financial system. While they are not a tangible currency, some economists argue that SDRs could be used as a less volatile alternative to the U.S. dollar.

posted by Sepp Hasslberger on Sunday October 12 2003
updated on Monday February 14 2011

URL of this article:
http://www.newmediaexplorer.org/sepp/2003/10/12/will_oil_end_war_economy.htm

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Readers' Comments

Wow! What a good idea. Except, remember: That's what S. Hussein said too. And you saw what the Texas oil slingers did then. I guess Putin has a better sense of proportion. What else would a visiting German Chancellor want most to hear. They could have put on some option spreads before the announcement. Who knows. It's a long weekend. (Holiday, Monday NY & CHI).

Incidentally, our ally in the use of gold in preference to receiving payments in depreciating paper currency whether $ Es Y # r Frcs are various Islamic organizations, and several huge Asian city and country states.

So as far as numbers of persons is concerned 1 B Muslims, 2 B Chinese and neighbors, and perhaps more than half of 1 B+ in India could easily turn the tide of small accounts. AndÂ that might be enough.

Small enterprise employs most of the people who work for businesses. Just look in the Yellow Pages of a phone book (at least in US). There are thousands, and thousands of little businesses. You will never have even heard of them, or what they do. But most of them employ someone, or two or three others.

A little attitude goes a long way. Should digital gold payment systems ever get wise to the world and open up to this community by cellphone, the movement I spoke about last week will be able to get underway.

Everyone in Asia has a cellphone and knows how to text messages on the numbers with one hand (one thumb, usually). They use text constantly for crucial business and social needs. It has become indispensable for efficiency in conduct of virtually every enterprise.

I think perhaps it will take an Asian Vault and paymentsÂ organizer to attract the loyalty of this audience, but it surely will come. It will be the mid-summer of madness if the American and English digital vaults can not adapt their software programming to the cellphone. But it could happen. Business men are not known for their intelligence.

Six years on, we are seeing a move away from the dollar that is sustained and in some way accelerating. Whether it will force the US to curtail its desire to control events in other countries remains to be seen ...

The demise of the dollar
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

Posted by: Sepp on October 6, 2009 04:09 AM

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